| I have audited the attached Balance Sheet of ALACRITY ELECTRONICS
LIMITED, as at 31st December 2003 and also the Profit and Loss Account
for the year ended on that date annexed thereto, together with the
Notes thereon. These financial statements are the responsibility of the
Companys Management. My responsibility is to express an opinion on
these financial statements based on my audit.
I have conducted my audit in accordance with the Auditing Standards
generally accepted in India, which require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The audit includes
examining, on test basis, evidence supporting the amounts and
disclosures in the financial statements and also assessing the
accounting principles used and significant estimates made by the
Management, as well as evaluating the overall financial statements
presentation. I believe that my audit provides a reasonable basis for
my opinion.
As required by the Manufacturing and Other Companies (Auditors Report)
Order, 1988, issued by the Central Government under section 227(4 A) of
the Companies Act, 1956, I have to further state that:
1. The company has maintained proper records showing full particulars
including quantitative details and situation of fixed asset There is
a regular programme of verification of fixed assets which in my opinion
is reasonable having regard to the size of the company and the nature
of its business. No material discrepancies have been noticed on such
verification.
2. None of the fixed assets has been revalued during the year.
3. a) Physical verification of the stock of trading items, finished
goods and components have been conducted by the management at the close
of the financial year and there have been discrepancies noticed on such
verification as compared with the book records.
b) The discrepancies noticed on verification between the physical stock
and book records have been properly dealt with in the books of account.
c) The procedure of physical verification of stock followed by the
management is generally found to be reasonable and adequate in relation
to the size of the company and the nature of its business.
d) In my opinion, the valuation of inventory is fair and proper, and in
accordance with the normally accepted accounting principles and is on
the same basis as in the preceding year.
4. The company has taken loans from a party as listed in the register
maintained under section 301 of the Companies Act, 1956. The rate of
interest and terms and conditions of such loans are not prima facie
prejudicial to the interest of the company. The provisions of section
370(1C) of Companies Act, 1956 are not applicable after 31st October
1998 by virtue of section 370(6) of the said Act.
5. The company has not granted any loans, secured or unsecured to
companies, firms or other parties listed in the register maintained
under section 301 of the Companies Act, 1956, except interest free
advances to a company in which the directors_are interested. In respect
of such advances no terms and conditions for repayment and interest
payment have been stipulated. The provisions of section 370(1C) of
Companies Act, 1956 are not applicable after 31st October 1998 by virtue
of section 370(6) of the said Act.
6. In respect of loans and advances, in the nature of loans given by
the company, the parties have generally been regular in the repayment
of principal amount. However no interest have been stipulated and
collected.
7. In my opinion and according to the information and explanations
given to me, there are adequate internal control procedures
commensurate with the size of the company, and the nature of its
business with regard to the purchase of stores, components, goods,
fixed assets etc., and with regard to the sale of goods.
8. In my opinion, the prices of goods and services from and to
companies entered in the register maintained under section 301 of the
Companies Act, 1956 and aggregating during the year to Rs.50,000/- or
more in respect of each party are reasonable having regard to
prevailing market prices for similar goods, components and services.
9. The company has a regular procedure for determination of
unserviceable or damaged components, spares, accessories and finished
goods. Adequate provision has been made in the accounts for the loss
arising on the items so determined.
10. As per the information and explanations given to me, the company
has not accepted any fixed deposits from the public during the period.
11. Reasonable records have been maintained by the company for sale and
disposal of scrap.
12. During the year the company did not have internal audit system.
13. The Central Government has not prescribed maintenance of cost
records under Section 209(1)(d) of the Companies Act, 1956.
14. Provident Fund dues relating to the period from 1st January 2003 to
31St December 2003 and aggregating to Rs.19,91,359/- which has fallen
due for deposit with the appropriate authorities has not been so
deposited as at 31/12/2003. The company has neither collected nor
remitted Employees State Insurance dues during the financial year.
15. The Company is yet to pay undisputed income-tax dues in respect of
the return filed for the assessment years 1999-2000 and 2000-01 the
liability of which as at 31/12/2003 is Rs.1572313/-. Further a sum of
Rs.11,99,226/- is outstanding in respect of income-tax deducted at
source payable for a period exceeding six months prior to the financial
year ended 31st December 2003. In addition Tamilnadu General Sales Tax
of Rs.5,17,904/-. Central Sales Tax of Rs.2,42,532/-, Excise Duty of
Rs.4,84,311/- and Service Tax of Rs.2,22,995/- are also pending payment
as at 31.12.03. Apart from this, there are no other undisputed amounts
payable in respect of taxes & duties as at the last day of the
financial year for a period of more than six months from the date they
became payable.
16. According to the information and explanations given to me, no
personal expenses of employees or directors have been charged to the
revenue accounts, other than those payable under contractual
obligations or in accordance with generally accepted business
practices.
17. The company is not a Sick Industrial Company, within the meaning of
clause (o) of sub-section 1 of Section 3 of the Sick Industrial
Companies (Special Provisions) Act, 1985.
18. In case of trading activities of the company, there have been no
damaged goods.
19. In respect of service activities, the company has a reasonable
system of recording receipts, issues and consumptions of materials and
stores and allocating consumables to the relative jobs, commensurate
with the size and nature of its business.
Further to the comments referred to above, I report that:
1. I have obtained all the information and explanations which, to the
best of my knowledge and
belief were necessary for the purposes of my audit.
2. In my opinion, proper books of accounts as required by law have been
kept by the Company so far as appears from my examination of these
books.
3. The Companys Balance Sheet and Profit and Loss Account read with
the Notes forming part thereof, dealt with by this Report, are in
agreement with the books of account.
4. In my opinion, the Profit and Loss Account and Balance Sheet comply
with the Accounting Standards referred to in sub-section (3C) of
Section 211 of the Companies Act, 1956.
5. Based on the written representations made by the Directors and
taken on record by the Board of Directors, I state that none of the
Directors is disqualified from being appointed as a Director in terms
of Section 274(l)(g) of the Companies Act, 1956.
6. In my opinion and to the best of my information and according to
the explanations given to me, the said accounts read with accounting
policies and the notes thereof, give the information required by the
Companies Act, 1956 in the manner so required subject to the
following:-
1) Note No.4 of Schedule regarding recoverability of sundry debtors
outstanding for a period exceeding six months for a sum of
Rs.6,65,12,445/-.
2) The Company has been unable to renegotiate its borrowings from its
bankers. Without such financial support there is substantial doubt that
it will be able to continue as a going concern. Consequently,
adjustments may be required to the recorded asset amounts and
classification of liabilities. The financial statements (and notes
thereto) do not disclose this fact. Further the manufacturing
operations have been suspended since March 2003. The net worth of the
Company is eroded to the extent of 82%. But the accounts have been
prepared on the principles applicable to a going concern.
In my opinion, subject to the omission of the information dealt with in
the preceding paragraph, the financial statements give a true and fair
view of the financial position of the Company as at 31st December 2003
and the results of its operations for the year then ended:
(a) In the case of the Balance Sheet, of the state of the Companys
affairs as at the end of the financial year; and
(b) In the case of the Profit and Loss Account, the LOSS for the
financial year.
Chennai RAJAN VERGHESE CHACKO
April 30, 2004 Chartered Accountant | 